Professional Adviser Debates
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Sandra-hogg-80x80 Moderator

Sandra Hogg

Moderator

Moderator

As if to confirm Michelle's statistic about adults rating friends and family as a trustworthy source of pension advice or information, I was somewhat stunned when a friend told me only a few weeks ago that she was going to take out her entire £300,000 pension fund in April. She explained that after paying for a once-in-a-lifetime holiday, she was planning to give the rest to her kids to help them get onto the housing ladder.

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Closing Statement

Proposer Cracknell-michelle-tpas-80x80

Michelle Cracknell

chief executive, The Pensions Advisory Service

In the blue corner

We know from the calls that we receive on our helpline that people struggle with the decisions that they are presented with at retirement. It is not surprising as the decisions are new to many people and need to consider what may be needed and what is a priority in the future, a future of which the person has little insight into.

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Opposer Hall-dennis-yellowtail-ifa-80x80

Dennis Hall

Managing director, Yellowtail Financial Planning

In the pink corner

When I agreed to take part in this debate I believed it would get side-tracked into an argument over the rights and wrongs of the pension changes, and I would be trounced! Yet everyone who has contributed has remained largely on track and we find the two sides are not a million miles apart. But there are differences, and I’m not sure it’s just the semantics of guidance and advice. However, in closing I cannot ignore the rights and wrongs of the changes, even if only on issues of timing! Reading through the arguments again, and the accompanying comments, my sense is there’s an overwhelming realisation that what’s needed is awareness among consumers that they must get advice (not guidance). But we also need the infrastructure to deliver that advice. As things stand both those things are missing. That’s potentially going to mess up the retirement plans for so many people once this rolls out.

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Rebuttals

Proposer Cracknell-michelle-tpas-80x80

Michelle Cracknell

chief executive, The Pensions Advisory Service

In the blue corner

The question was “Can we expect the general public to make informed decisions about their retirement income following the recent Budget announcement?” The answer is yes subject to there being an effective system in place that helps people make informed decision. People do not know what they do not know. It is possible to have a system that will help more people know more and therefore make informed decisions. An informed decision may be that “I need advice” because I now know the extent of the issues. People do not know what they do not know. It is possible to have a system that will help more people know more and therefore make informed decisions. An informed decision may be that “I need advice” because I now know the extent of the issues.

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Opposer Hall-dennis-yellowtail-ifa-80x80

Dennis Hall

Managing director, Yellowtail Financial Planning

In the pink corner

The question is unambiguous and straightforward, and could be answered with a simple yes or no. But this is a debate so we argue our respective positions. At least that’s how it should work, because Michelle doesn’t actually put forward an argument. Instead she says “we can create a system”. I immediately hear Jeremy Paxman inside my head saying “that’s not a yes is it?”

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Guest Phase

Towler-jenna-pp-80x80 Chris-fry-80x80

Jenna Towler

Deputy editor, Professional Adviser

Guest

The pensions world was thrown a curveball by the Chancellor on 19 March when George Osborne used his Budget to ‘give freedom back to savers’, grabbing some deserved headlines in the process. No-one I have spoken to since (and that is quite a lot of pensions people) had a clue it was coming. For many making financial decisions is not an easy process and deciding to retire is one of the biggest life changers going.

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Opening Statements

Proposer Cracknell-michelle-tpas-80x80

Michelle Cracknell

chief executive, The Pensions Advisory Service

In the blue corner

Yes, we can create a system that makes it easier for people to make informed decision. There can never be a system that guarantees that people (a) use the information and resources available to make a better decision and (b) make the right decision, as this is subjective and/or only known with the benefit of hindsight.

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Opposer Hall-dennis-yellowtail-ifa-80x80

Dennis Hall

Managing director, Yellowtail Financial Planning

In the pink corner

There’s a temptation to argue the rights and wrongs of the Budget proposals instead of the general public’s ability to make (well) informed financial decisions, which is what we’re being asked. We need only look at history, human behaviour and behavioural finance, to see how easily people make sub optimum decisions. Yes, there are those who make sensible decisions, but there will be others who’ll do a ‘Viv Nicholson’ and spend, spend, spend – one survey estimates 3% of people will splurge their pension pot – that’s 3% too many.

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22%
78%

24%
76%

24%
76%

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About this debate

In the recent Budget the Chancellor George Osborne said that from next year those aged 55 and over could access their entire pension fund as a lump sum subject to their marginal rate of tax. He also increased maximum income available under capped drawdown while also decreasing the threshold for entry into flexible drawdown. 

While these reforms have been largely welcomed there are concerns that the general public do not know enough to make informed decisions about their retirement income. 

We've asked the question as to whether we can expect the general public to make informed retirement income decisions following the Budget. 

In the yes camp is The Pensions Advisory Service's chief executive Michelle Cracknell. Cracknell believes that if a robust guidance service is put in place then people will become more informed. 

Opposing this is Yellowtail Financial Planning managing director Dennis Hall who believes such a guidance service is unlikely to succeed and we will see retirees making sub-optimal decisions.

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